WSA Public Forum – Dalkeith 20 February 2013 – a presentation by Ken Eastwood

Profli-gate – How are we paying for all these future projects?

I would like to ask you all to take your memory back to four and a half years ago.  At that time we had a very even result as to who would govern our State for the next term.  So close was the result of that last election that the future government was decided by the minority National Party.

At the time we, the voting public, were mainly concerned about Law and Order, our very much under pressure Public Health system, the inadequacy of our Public Transport and major road systems, our deteriorating Education facilities and the escalation of Perth’s cost of living.

So, having been a staunch Liberal supporter for all of my life, these comments are not about party politics but they are about how just our present Government has spent our taxpayer dollars.

With a net State debt of $3.6 billion dollars four and a half years ago, we were easily convinced that the coming mining boom would solve all of our problems. Right now, after just 4½ years of that mining boom we have a state debt projected to grow to $18.6 billion dollars by 30 June this year. That is an increase of 520% in that short period.  On current estimates our net state debt will reach $25 billion dollars by the end of the 2015-16 financial year.

Even with our recent population explosion that is an increase from $1,650 per head of population in 2008 to approximately $6,250 per head in 2012 and on current trends will reach $9,400 per head of population by June 2016. Our net share of State debt per head of population has quadrupled in just 4.5 years.   Such an increase in debt levels will have occurred during the most profitable five years in the State’s history.

But, is there any good news?

There is no evidence to suggest:

That our Police Force is any better resourced?

That our Health system is in any better shape with more hospital beds and no more ambulance ramping?

That our roads are coping with the increased traffic or that our public transport system is in better shape?

That our education facilities are in better shape?

That cost of living pressures are any easier to manage?

Let’s have a look at some of this governments more worrying decisions over the past three or four years.

Why are we spending close to $1billion dollars on Elizabeth Quay and its associated capital works?  This is a project which will yield no obvious social, cultural, environmental or commercial benefit to our city and the diversion of Riverside Drive with its 9 – 10 sets of required traffic lights can only add to our traffic chaos which is obviously getting worse by the day. Surely there must be a public outcry at such wanton expenditure and destruction of The Esplanade, one of our city’s greatest assets.  Well, yes, you are right there has been a public outcry but a petition of some 14,000 signatures has been completely ignored by this government.  This is expenditure which should have been utilised, and better applied, in many other areas requiring an injection of funds.

In the current financial climate, why are we spending a further $1.2 – $1.3 billion to build the new Burswood Stadium?  Well, our government has the answer.  We won’t build it at all.  We will enter into an arrangement that will let a private developer design-build-finance and maintain the stadium and our government will rent it back over a 25 year period. Sounds good, but, any private developer will have to recover the cost of the write off of the asset they create, manage principal repayments, and finance the project at interest rates much higher than any government would pay plus yield an acceptable profit over the 25 years of the arrangement. In addition the developer will be required to finance upgrades, refurbishment and maintenance and maintain a profit during the time the stadium lies idle which, in Perth, will be most of the summer months.

This method of financing a stadium is bound to cost us, the taxpayers, a great deal more than the initial estimate to build such a facility. WE will be paying dearly if we wish to attend a football match in Perth.  What will this $1.3b facility be used for between October and March of each year? Is this really the way to finance our public infrastructure?

Our State’s AAA credit rating is being sorely tested. The slide shows projected interest cost in 2016 even if our AAA rating can be maintained.  In just 8 years our net interest costs have escalated from $136 million per year, or 0.7% of the State’s annual income, to $877 million per year in 2016, being 2.7% of the State’s annual Revenue. That represents an increase in interest costs alone of over 400% over that period. A loss of our coveted AAA rating will mean even more pain for the Western Australian public. The loss of such a cushion against the cost of our other more essential borrowings will result in an increased rate of interest on ALL State borrowings.

The loss of our AAA rating would increase our net interest costs in 2016 by a minimum of some $73 million per annum even if favourable borrowing conditions continue. Our public utility charges are increasing at such an alarming rate that all state government departments are now being directed to curtail their expenditure.

Expect a further leap in the cost of power, water, gas, healthcare and other essential services to compensate for these additional costs.

You can see from the slide now before you that the State’s operating balance has fallen from a surplus of $2.1 billion in 2008 to a projected surplus of just $390 million in 2014. And this is assuming that the current export price of our iron ore presently at record levels of $158 per tonne will continue for a couple more years at least.

Development Assessment Panels, with all their faults and shortcomings, are also costing us.  In an excellently researched paper written by Ian MacRae, the President of the Local Government Planners Association, in August 2012, he commented, in relation to DAPs procedures, that people are now paid to do things they previously did at no cost to the State Government.  He states that the impact on the Department of Planning in its diversion away from strategic planning is incalculable.  He further stated that it is no coincidence that the department has recently had to go to Treasury seeking further allocations due to the difficulty in delivering core departmental responsibilities.  Indeed $400,000 is now being spent working out whether the department is delivering taxpayer’s value for money.  As far as DAPs are concerned – it certainly isn’t, Mr MacRae commented.

One would have assumed that the cost effectiveness of Development Assessment Panels would have been well and truly considered well before they were foisted on the community. In addition, rather than streamlining the system, the DAPs process has complicated and extended the approval process in most cases in which it has acted.

You might think that we would grasp with both hands the experiences of other states when it comes to the issue of costs associated with the amalgamation of our Local Governments. Sadly, this is not so.  Even though we read of the problems that amalgamations of councils on the east coast have caused (particularly in Queensland), we push on regardless.  

Just 5 months ago the Queensland press reported that close to 25% of amalgamated councils in that state are now scrambling to undo the damage and de-amalgamate.  Only 20% of the community there is required to vote for such action to proceed, compared to a vote of 50% which is required here.

With councillors being paid in excess of $120,000 each per annum to serve on these massive councils on the east coast, and the huge costs associated with amalgamation and now de-amalgamation, one might ask:

How do we pay for all this waste which yields no obvious benefits?

Could it be you and I, the electors of Western Australia who are to foot the bill?

KEN EASTWOOD AM FCPA

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